January 30, 2010

 

CBOT Soy Review on Friday: Tumbles on strong dollar, South America

 

 

Chicago Board of Trade soybean futures Friday touched their lowest prices in nearly four months amid pressure from the strong U.S. dollar and expectations for a big South American crop.

 

March soybeans closed down 17 3/4 cents, or 1.9%, at US$9.14 per bushel. The contract's session low of US$9.13 was its lowest price since Oct. 7. It ended down 37 1/2 cents on the week and US$1.34 1/2 on the month.

 

There was general weakness in commodities as a strong U.S. gross domestic product report sent the dollar to its highest level against major competitors since August. A firm dollar is often seen as bearish because it makes U.S. commodities less attractive to foreign buyers and reduces investors' appetites for risk.

 

Projections for large soy crops in Brazil and Argentina were bearish amid worries about China switching its export business away from the U.S., analysts said. Weather in South America remains favorable, a broker said.

 

The mindset in the market continues to encourage people to sell rallies, a trader said. CBOT March soybeans have technical support around US$9.01 to US$9.02 and around US$8.78 3/4, said Dave Marshall, an independent marketing adviser and commodities broker.

 

"Without some catalyst for a tightening of supply or an improvement in demand, it's hard to come up with anything other than short-term rebounds," he said. "It's very difficult to string together more than one up day in a row."

 

Month-end positioning may well have been another factor in the market amid expectations for continued weakness, Marshall said. Traders "want to be on the right side of a trend as you go into the end of a month," he said.

 

Commodity funds sold an estimated 6,000 soybean contracts.

 

 

Soy Products

 

CBOT soy product futures finished mixed, as soymeal sank with soybeans and soyoil ended unchanged. Commodity funds sold an estimated 2,000 soymeal contracts and 1,000 soyoil contracts.

 

March soymeal closed down US$7.80, or 2.8%, at US$273.80 per short tonne. March soyoil was unchanged at 36.15 cents per pound.

 

There was unwinding of short soyoil and long soymeal spreads, a trader said. With soymeal falling more than US$7 and soyoil finishing unchanged, "it just argues there was some spread unwinding of the short oil-long meal [spreads] that have really supported meal well" recently, he said.